CLEAN DEVELOPMENT MECHANISM PROJECT DESIGN DOCUMENT FORM (CDM-SSC-PDD) Version 03 - in effect as of: 22 December 2006 CONTENTS

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1 CLEAN DEVELOPMENT MECHANISM PROJECT DESIGN DOCUMENT FORM (CDM-SSC-PDD) Version 03 - in effect as of: 22 December 2006 CONTENTS A. General description of the small scale project activity B. Application of a baseline and monitoring methodology C. Duration of the project activity / crediting period D. Environmental impacts E. Stakeholders comments Annexes Annex 1: Contact information on participants in the proposed small scale project activity Annex 2: Information regarding public funding Annex 3: Baseline information Annex 4: Monitoring Information

2 Revision history of this document Version Date Description and reason of revision Number January 2003 Initial adoption 02 8 July 2005 The Board agreed to revise the CDM SSC PDD to reflect guidance and clarifications provided by the Board since version 01 of this document. As a consequence, the guidelines for completing CDM SSC PDD have been revised accordingly to version 2. The latest version can be found at < December The Board agreed to revise the CDM project design 2006 document for small-scale activities (CDM-SSC-PDD), taking into account CDM-PDD and CDM-NM.

3 SECTION A. General description of small-scale project activity A.1 Title of the small-scale project activity: Title: Biogas recovery from wastewater treatment in PT. Umbul Mas Wisesa Palm Oil Mill Version: 01 Date: 11/08/2011 A.2. Description of the small-scale project activity: Introduction The proposed project activity is the implementation of a sequential stage of anaerobic wastewater treatment system with biogas recovery in a palm oil mill. Both, the palm oil mill as well as the wastewater treatment system with biogas recovery are Greenfield projects. The palm oil mill will be set up by PT. Umbul Mas Wisesa ( UMW ) at Labuhan Batu, North Sumatra, Indonesia. The mill is expected to be fully operational in March 2012 for producing crude palm oil ( CPO ) while discharging the raw palm oil mill effluent ( POME ). The designed production capacity of the mill will be 65 tonnes/hr of fresh fruit bunch (FFB). The discharged POME will be rich in organic content with Chemical Oxygen Demand (COD) value approximately 65,000 mg/l. The average daily discharge of POME from the palm oil mill is expected to be 780m 3 /day. Purpose of the proposed project activity Degradation of organic content in the POME results in the generation of biogas (i.e. methane) which will be emitted into the atmosphere if not recovered. The purpose of the proposed project activity is to treat the discharged POME in an anaerobic digester and to recover the biogas which would have otherwise been emitted to the atmosphere. The recovered biogas will be combusted either by use in a boiler in the palm oil mill or by flaring or by a combination of both. The use of the biogas is not part of the CDM project activity. Treatment of discharged POME in anaerobic open lagoons without biogas recovery is the most plausible baseline scenario for the proposed project activity. This will be demonstrated under section B.4 of the PDD. Therefore in the absence of the project, the methane gas from anaerobic open lagoons would have been emitted into the atmosphere resulting in GHG emissions. Proposed technology for the project activity The technology used in the project activity comprises of pre-treatment, anaerobic digester and downstream aerobic treatment system. The POME will be stabilized and cooled down. The suspended solids and emulsified oil will be removed from the POME. The pre-treated POME will then be passed on to the anaerobic digester where the COD content will be reduced. The digester will be equipped with biogas recovery system to recover the generated biogas. The sludge generated from the digestion process will be dried and used for land application under aerobic condition. The clarified POME will be treated in the downstream activities which include aerobic treatment systems. The final treated POME from the treatment plant will be of re-usable quality and will be used for land application under aerobic condition. The project activity will therefore reduce greenhouse gases (GHG) emissions through recovery of methane in the anaerobic digesters.

4 Contribution to Sustainable Development The project activity contributes to the sustainable development in four principal aspects: Environmental Sustainability 1. The project activity involves the use of anaerobic digesters with methane recovery. It thus avoids the emission of methane into the atmosphere and therefore contributes to the reduction of GHG emissions.the project activity may further utilize the recovered biogas for energy generation for captive consumption; this would reduce the emissions associated with the fossil fuel use. It will also conserve the use of natural resources used as fuel. 2. The treated wastewater discharged from the project activity will meet the standards set for the industrial wastewater, particularly for palm oil industry The project activity introduces water re-use which reduces on-site water consumption, and thus contributes to conservation of natural resources (i.e. water). 4. The project activity will not cause any disturbance to the biodiversity and the natural habitats in the surrounding area of the project. 5. The PP will ensure all requirements pertaining to this land use, i.e. permissions and approvals from the relevant agencies, will be complied with. 6. The project activity will implement best practices in issues related to health and safety, and thus it will not impose health risk for the employees or for the local community. Further, the avoidance of methane emission will reduce the unpleasant odour associated with the POME treatment in the most plausible baseline system. 7. The PP will ensure that the project activity will comply with the work safety regulations. There will be staffs transferred from the group company, who are ISO 14001, RSPO and ISCC certified. These employees are used to work in accordance with the Health and Safety Regulations at workplace. The PP will form a specific committee for health and safety issues at workplace. 8. All procedures related to efforts in preventing accidents in the project site and the actions to be taken if accidents happen are documented in a company s reference called Kebijakan Keselamatan dan Kesehatan Kerja. Economic Sustainability 1. The project activity will not reduce the income of local community. In fact, as it requires more skilful manpower in operation from diverse backgrounds (i.e. engineering, science and finance), the implementation of this project will potentially increase employment opportunities in the region. 2. Further, the PP will ensure that there are no layoff issues, to the extent possible, which will arise due to the project activity. For any such occurance, a discussion will be conducted and the PP will ensure that the national labour law is complied. 3. The project activity will not reduce the quality of any public service (e.g. health, education, energy, etc) provided for local community in any way. Social Sustainability 1. The project activity has encouraged community participation. A local stakeholder consultation has been conducted. More details of the local stakeholder comments and the responses and further actions taken by PP are provided in section E of this PDD. 2. The project activity will not cause any conflicts in the community that can affect the social integrity of the local communities. Technological Sustainability 1. The use of foreign imported technology will stimulate and promote the development and transfer of more wastewater treatment technologies into Indonesia. The technology supplier 1 MenLH Decree 51/1995, Attachment B.IV (Palm Oil Industry),

5 A.3. will ensure that the employees can operate and maintain the system at ease independently. Further, there will be technology transfer with regards to construction of the project and the use of biogas. 2. The technology is a new anaerobic reactor imported from India. It is not obsolete and neither is in trial period. Implementation of this project will encourage the use of similar technical design technology in Indonesia and thus will promote the sustainability of this technology. 3. Through the technology transfer (i.e. skills upgrading and trainings), this project activity will involve use the new technology in the treatment system and will enhance local operators knowledge and expertise. Thus, the local capability and workforce quality will be improved. Project participants: Name of the party involved ((host) indicates a host party) Private and/or public entity(ies) Project participants (as applicable) Kindly indicate if the Party involved wishes to be considered as project participant (Yes/No) Indonesia PT Umbul Mas Wisesa No Indonesia Knowledge Integration Services No (Singapore) Pte Ltd A.4. Technical description of the small-scale project activity: A.4.1. Location of the small-scale project activity: A Host Party(ies): Republic of Indonesia A Region/State/Province etc.: North Sumatra Province, Sumatra Island A City/Town/Community etc: Panai Tengah, Labuhan Batu Regency A Details of physical location, including information allowing the unique identification of this small-scale project activity : The project activity will be located at Tanjung Mulia village, Panai Tengah sub-district, 212 km South East of Medan, the capital city of North Sumatra Province. The coordinates for the CDM project activity at the palm oil mill site is approximately 2 o N and 100 o E.

6 Labuhan Batu Figure 1: Labuhan Batu, North Sumatra (Source: Wikipedia, 2011) Figure 2: Location map for Panai Tengah (Source: Google Map, 2011) A.4.2. Type and category(ies) and technology/measure of the small-scale project activity: In accordance with Appendix B of the simplified modalities and procedures for small-scale CDM project activities (SSC M&P), the proposed project activity falls under the following category 2 : Type III: Other project activity Category M: Methane recovery Baseline and monitoring methodology applied: AMS-III.H Methane recovery in wastewater treatment (version 16) Technological description The technology applied for the project activity is introduction of a sequential stage wastewater treatment system utilising an anaerobic digester system with methane recovery for treatment of POME generated from the palm oil milling operations. 2

7 The flow of raw POME from the palm oil mill will be stabilized in an equalization tank. The stabilized POME will then be cooled through a heat exchanger system. The cooled POME will then be treated in a Dissolve Air Flotation and primary clarifier system for removing the suspended solids and emulsified oil. The POME will be treated biologically to reduce the COD content in an anaerobic digester. The digester will be equipped with biogas recovery system to recover the generated biogas. The sludge generated during the digestion process will be separated from the POME in the subsequent clarifier. A portion of the sludge is then re-circulated to the digester to help maintaining adequate population of active bacteria inside the digester. The remaining of the sludge will be dried and then used for land application under aerobic condition. The clarified overflow POME from the clarifier will be further treated in the downstream activities. This includes aerobic treatment in conventional and extended aeration tanks followed by post treatment of the POME (i.e. chlorination, de-chlorination and filtration with multi grade and activated carbon). The final treated POME will be discharged to nearby plantation area under aerobic condition. The anaerobic digester used in the project activity will have the following characteristics: Capacity: 8,495 m 3 Hydraulic residence time: 11 days (=8,495m 3 / 780 m 3 /day) COD removal efficiency: 85% A.4.3 Estimated amount of emission reductions over the chosen crediting period: Years Annual estimation of emission reductions in tonnes of CO 2 equivalent (tco 2 e) , , , , , , , , , ,399 Total estimated reductions (tonnes of CO 2 e) 513,990 Total number of crediting years 10 Annual average of the estimated reductions over the crediting period (tco 2 e) 51,399 A.4.4. Public funding of the small-scale project activity: No public funding is involved for this project activity.

8 A.4.5. Confirmation that the small-scale project activity is not a debundled component of a large scale project activity: In accordance to the Appendix C of the simplified modalities and procedures for the small-scale CDM project activities, a small-scale project activity shall be deemed to be a de-bundled component of a large project activity if there is a registered small-scale CDM project activity or an application to register another small-scale CDM project activity: With the same project participants In the same project category and technology/measure Registered within the previous 2 years Whose project boundary is within 1 km of the project boundary of the proposed small-scale activity at the closest point. The project participant (PP) has reviewed the list of projects published on the UNFCCC website and based on such review it is concluded that the project activity is not a de-bundled component of a large scale project activity. SECTION B. Application of a baseline and monitoring methodology B.1. Title and reference of the approved baseline and monitoring methodology applied to the small-scale project activity: The baseline and monitoring of this project activity is based on the following approved methodology, guidelines and tools: (1) AMS-III-H (version 16): Methane recovery in wastewater treatment (2) General Guidelines to SSC CDM methodologies (version 17). (3) Tool to determine project emissions from flaring gases containing methane (EB 28, Annex 13). (4) Tool to calculate project or leakage CO 2 emissions from fossil fuel combustion (EB 41, Annex 11). B.2 Justification of the choice of the project category: The project activity involves the installation of a Greenfield anaerobic digester based wastewater treatment facility, which will be built in parallel to a completely new palm oil mill. The approved small-scale methodology AMS-III.H (version 16) is applicable to the project due to the following reasons as presented in the table below. Table 1: Justification of the choice of the project category AMS-III.H (version 16) Para. AMS-III.H Applicability Requirements No. 1 This methodology comprises measures that recover biogas from biogenic organic matter in wastewater by means of one, or a combination, of the following options: a. Substitution of aerobic wastewater or sludge treatment systems with anaerobic systems with biogas recovery and combustion; Project activity The proposed project activity implements a Greenfield anaerobic digester with biogas recovery, without sludge treatment, to an untreated wastewater stream generated from a Greenfield palm oil mill. This therefore refers to option 1 (e). b. Introduction of anaerobic sludge treatment system

9 Para. No. AMS-III.H Applicability Requirements with biogas recovery and combustion to a wastewater treatment plant without sludge treatment; c. Introduction of biogas recovery and combustion to a sludge treatment system; d. Introduction of biogas recovery and combustion to an anaerobic wastewater treatment system such as anaerobic reactor, lagoon, septic tank or an on-site industrial plant e. Introduction of anaerobic wastewater treatment with biogas recovery and combustion, with or without anaerobic sludge treatment, to an untreated wastewater stream; f. Introduction of a sequential stage of wastewater treatment with biogas recovery and combustion, with or without sludge treatment, to an anaerobic wastewater treatment system without biogas recovery (e.g. introduction of treatment in an anaerobic reactor with biogas recovery as a sequential treatment step for the wastewater that is presently being treated in an anaerobic lagoon without methane recovery). Project activity 2 In cases where baseline system is anaerobic lagoon the methodology is applicable if: a. The lagoons are ponds with a depth greater than two meters, without aeration. b. Ambient temperature above 15 C, at least during part of the year, on a monthly average basis; c. The minimum interval between two consecutive sludge removal events shall be 30 days. As this is a Greenfield project, the characteristic of the most plausible baseline treatment system (i.e. open anaerobic lagoons without methane recovery) will be based on available information from existing anaerobic lagoons at similar industrial facilities in Indonesia. The information referred is from selected three (3) CDM projects, which are registered, that have implemented biogas recovery measure to their existing POME treatment system (i.e. open anaerobic lagoons without methane recovery) in the projects. The details of the projects are provided in Annex 3 of this PDD. In absence of the project activity, the wastewater would have been treated in series of anaerobic lagoons without methane recovery. The average depth of three (3) aboveidentified registered CDM projects (i.e. with open anaerobic lagoons as baseline units), from which the

10 Para. No. AMS-III.H Applicability Requirements Project activity baseline COD removal efficiency for this project activity is referred (i.e. 85%), is 6 meters 3. The ambient temperature in Labuhan Batu is estimated using the average temperature of the nearest major city (i.e. Medan). The average annual temperature in this area is 26.2 o C 4. Taking into the consideration of the required manpower to conduct desludging, the typical interval between two consecutive sludge removal events would be more than 30 days. Further, as per the publication Pipeline 5 the lagoons are able to properly function without sludge removal for up to 5 to 10 years. 3 The list of projects from which this value was taken is provided in Annex 3 of this PDD National Small Flows Claringhouse (1997). Lagoons Need Propoer Operation, Maintenance. PIPELINE Spring 1997; Vol. 8, No. 2.

11 Para. AMS-III.H Applicability Requirements No. 3 The recovered biogas from the above measures may also be utilised for the following applications instead of combustion/flaring: a. Thermal or mechanical, electrical energy generation directly; Project activity The recovered biogas will be combusted either by use in a boiler for energy generation or by flaring or by a combination of both. b. Thermal or mechanical, electrical energy generation after bottling of upgraded biogas; or c. Thermal or mechanical, electrical energy generation after upgrading and distribution, in this case additional guidance provided in Annex 1 shall be followed: i. Upgrading and injection of biogas into a natural gas distribution grid with no significant transmission constraints; ii. Upgrading and transportation of biogas via a dedicated piped network to a group of end users; or iii. Upgrading and transportation of biogas (e.g. by trucks) to distribution points for end users. d. Hydrogen production. e. Use as fuel in transportation applications after upgrading. 4 If the recovered biogas is used for project activities covered under paragraph 3(a), that component of the project activity can use a corresponding methodology under type I Paragraphs 5 11 are not applicable. 12 New facilities (Greenfield projects) and project activities involving a change of equipment resulting in a capacity addition of the wastewater or sludge treatment system compared to the designed capacity of the baseline treatment system are only eligible to apply this methodology if they comply with the relevant requirements in the General guidelines to SSC CDM methodologies. In addition the requirements for demonstrating the remaining lifetime of the equipment replaced, as described in the general guidelines shall be followed. Even though some of the generated biogas from the project activity might potentially be used for electricity generation in biogas engine, the PP will not claim any emission reductions generated from it. This project activity is a Greenfield project which complies with the General guidelines to SSC CDM methodologies. The determination of plausible baseline scenario is presented in section B.4. There will be no equipment replaced; therefore, provisions pertaining to remaining lifetime of the equipment are not relevant to the project activity.

12 Para. AMS-III.H Applicability Requirements No. 13 The location of the wastewater treatment plant as well as the source generating the wastewater shall be uniquely defined and described in the PDD. 14 Measures are limited to those that result in aggregate emissions reductions of less than or equal to 60,000 tco 2 e annually from all Type III components of the project activity. Project activity The location of the wastewater treatment plant will be adjacent to the source of wastewater generation (i.e. the palm oil mill). The location is defined under section A.4.1. The project activity is expected to generate annual average emission reductions of 51,399 tco 2 e during the crediting period (refer to Section A.4.3 above) B.3. Description of the project boundary: The project boundary is delineated in Figure 3. COD = 65,000 mg/l Q = 780 m 3 /day Figure 3: Delineation of Project Activity The most plausible baseline scenario identified is open anaerobic lagoons which result in baseline methane emissions from wastewater treatment. The baseline scenario is delineated in the figure below.

13 Figure 4: Delineation of Baseline Scenario Table 2: Possible Greenhouse gas produced in the baseline and project activity Baseline Source Gas Inclusion Justification Emissions from the CO 2 No CO 2 emission is not baseline wastewater accounted because this is treatment system. generated from the decomposition of organic matter.. CH 4 Yes CH 4 is the major component in the biogas produced during anaerobic wastewater treatment Emissions from the baseline sludge treatment system. Emissions on account of electricity or fossil fuel used Emissions from the discharge of the effluent into river/lake/sea N 2 O No Excluded for simplification. CO 2 No There is no baseline sludge CH 4 No treatment system which will N 2 O No be affected by the project activity. CO 2 No Baseline emissions from CH 4 No electricity or fossil fuel N 2 O No consumption will not be accounted for because there will be negligible electricity consumption in the baseline scenario. CO 2 No The treated water is used for CH 4 No land application under aerobic N 2 O No condition and there will be no discharge to any river/lake/sea.

14 Project activity Source Gas Inclusion Justification Emissions from electricity CO 2 No The electricity source is from or fuel consumption in the biomass and/or biogas based project activity captive power plant in the palm oil mill. For ex-ante estimation, this emission is assumed zero. Emissions from wastewater treatment system affected by the project activity and not equipped with biogas recovery Emissions from sludge treatment system affected by the project activity and not equipped with biogas recovery Emissions from the discharge of the effluent into river/lake/sea Emissions from biogas release in capture system Emissions due to incomplete flaring of biogas However, for ex-post estimation, this emission will be included in the case when back-up generator is used. CH 4 No Excluded for simplification. N 2 O No Excluded for simplification. CO 2 No There is no component of the CH 4 No wastewater treatment system N 2 O No affected by the project activity which is not equipped with biogas recovery system. CO 2 No There is no provision for CH 4 No sludge treatment system in the N 2 O No project activity. CO 2 No The wastewater will be used CH 4 No for land application under N 2 O No aerobic condition and will not be discharged to any river/lake/sea. CO 2 No CO 2 emission from biogas release is not accounted. CH 4 Yes CH 4 is the major component in any fugitive biogas not captured by the capture system. N 2 O No Excluded for simplification. CO 2 No It is assumed that CO 2 emissions from recovered biogas do not lead to changes of carbon pools in the LULUCF sector. CH 4 Yes Emission source due to incomplete flaring of biogas. For ex-ante estimation, this emission is assumed zero since flaring system will operate only in emergency (i.e. during maintenance or shutdown of the boiler). However, for ex-post estimation, this emission will be accounted whenever

15 Source Gas Inclusion Justification flaring system is used. N 2 O No Excluded for simplification. Emissions from biomass stored under anaerobic conditions CO 2 No No biomass will be stored CH 4 No under anaerobic conditions in N 2 O No the project activity. B.4. Description of baseline and its development: In accordance with General Guidelines to SSC CDM methodologies (Version 17), the PP has used the following steps for identifying the most plausible baseline scenario for the proposed Greenfield project activity. Step 1: Identification of alternative scenarios In this step, various alternatives available to the PP that deliver comparable level of service including the proposed project activity undertaken without being registered as a CDM project activity are identified. The comparable level of service here is defined as 85% COD removal efficiency as per specification of the technology (i.e. anaerobic digester in the CDM project activity). Alternative 1 Table 3: Alternative Scenarios for Baseline Identification No Alternative Comparability Check Installation of open anaerobic lagoons for wastewater treatment without methane recovery The use of anaerobic lagoons for treating POME has been adopted in most of the palm oil mills and can generally achieve COD removal efficiency of more than 85%. Alternative 2 Alternative 3 Alternative 4 Alternative 5 Alternative 6 Installation of anaerobic lagoons with sealed covers for wastewater treatment Use of series of aerobic lagoons for wastewater treatment Use of aerobic wastewater treatment using activated sludge Anaerobic digester without methane recovery Anaerobic digester with methane recovery but not registered as CDM project The use of anaerobic lagoons with sealed covers has been implemented previously in the region and, similar to Scenario 1, can achieve COD removal efficiency of more than 85%. This option is not a feasible alternative for POME s organic-loading is too high for direct aerobic treatment 6. Under optimal controlled conditions, the activated sludge system is able to achieve COD removal efficiency of 89% 7. The anaerobic digester tanks can generally achieve COD removal efficiency of 83-95% 8. Similar to Alternative 5, the anaerobic digester tanks can generally achieve COD removal efficiency of 83-95%. 6 Schuchardt F. et al. (2007). Effect of new palm oil processes on the EFB and POME utilisation. Proceedings of Chemistry and Technology Conference PIPOC, pg Wu T.Y., Mohammad A.W. (2010) Pollution control technologies for the treatment of palm oil mill effluent (POME) through end-of-pipe processes, Journal of Environment Management, Table 6, pg Wu T.Y., Mohammad A.W. (2010) Pollution control technologies for the treatment of palm oil mill effluent (POME) through end-of-pipe processes, Journal of Environment Management, Table 7, pg 1474.

16 Through evaluation of the possible alternatives in this step, it is shown that the use of aerobic treatment alone (i.e. series of aerobic ponds) is not feasible due to high organic load content of POME. Therefore, Alternative 3 is eliminated. Alternatives 1, 2, 4, 5 and 6 are further analysed in Step 2. Step 2: Elimination of alternatives which are non-compliant to applicable laws and regulations Alternatives 1, 2, 4, 5 and 6 are in compliance with current laws and regulations in Indonesia. The discharge of industrial wastewater in Indonesia is regulated by the Ministry of Environment under MenLH Decree 51/1995, Attachment B.IV (Palm Oil Industry) 9. According to this regulation, the COD of wastewater shall not exceed 350 mg/l and the 5-day BOD (BOD 5 ) shall not exceed 100 mg/l (refer to Table 4). There is no other regulatory requirement for the implementation of a specific wastewater treatment technology, such as an anaerobic digester or aerobic treatment system, at palm oil mills. Table 4: Effluent Discharge Standard for Palm Oil Industry 10 Parameter Maximum Permitted Level (mg/l) BOD COD 350 TSS 250 Oil and Fat 25 ph The remaining alternatives, with alternative 1, 2, 5, and 6 coupled with the downstream aerobic treatment system, are able to meet the regulated standard and hence are not excluded in this step. Step 3: Elimination of alternatives that face prohibitive barriers In this step, all the remaining alternatives will be assessed against one or more of the following barriers: investment barrier, technological barrier, and other barrier. A summary of the barrier analysis using investment, technological and other barrier is presented in Table 5 below. 9 MenLH Decree 51/1995, Attachment B.IV (Palm Oil Industry), 10 MenLH Decree 51/1995, Attachment B.IV (Palm Oil Industry),

17 Table 5: Summary of Barrier Analysis in POME Treatment Barrier Investment Barrier Alternative 1 - Installation of open anaerobic lagoons for wastewater treatment without methane recovery Construction of anaerobic open lagoons requires low capital cost. Likewise, the operation and maintenance cost are low as the energy required for operation is minimal 11. Anaerobic treatment in open lagoons will be regarded as the most financially viable. Alternative 2 - Installation of anaerobic lagoons with sealed covers for wastewater treatment Additional cost needs to be incurred by the project owner to cover the lagoons. The operational cost of operating covered lagoons will be much higher compared to operating open lagoons. In addition, several projects in relation to methane recovery from covered lagoons have been registered as CDM projects in the country thus demonstrating that this alternative already faces significant barriers compared to the most prevalent practice of treating wastewater in anaerobic open lagoons. Alternative 4- Use of aerobic wastewater treatment using activated sludge Operation of aerobic digester (i.e. activated sludge system) will not generate any revenue to the company. It involves higher capital cost and operational cost compared to the conventional anaerobic lagoon system. The aeration system in the aerobic digestion is very energy intensive. Lack of incentive together with the financial costs incurred is a prohibitive barrier for this option. Therefore, it will be unlikely for the project owner to select this alternative. Alternative 5 - Anaerobic digester without methane recovery Operation of anaerobic digester will not generate any revenue to the company. It involves higher capital cost and operational cost compared to the conventional anaerobic lagoon system. Lack of incentive together with the financial costs incurred is a prohibitive barrier for this alternative. Therefore, it will be unlikely for the project owner to select this alternative. Alternative 6 - Anaerobic digester with methane recovery but not registered as CDM project The investment barriers applicable to Alternative 5 (i.e. anaerobic digester without methane recovery) will be also applicable here. In addition, installation of methane recovery will further increase the cost. Due to high initial cash outlay, it is unlikely that the project owner will select this option. 11 Wu T.Y., Mohammad A.W. (2010) Pollution control technologies for the treatment of palm oil mill effluent (POME) through end of pipe process, Journal of Environmental Management, No 91, pg

18 Barrier Technological Barrier Alternative 1 - Installation of open anaerobic lagoons for wastewater treatment without methane recovery The ponding system technology is reliable and stable 12. Therefore, it is easier to manage and involves lower risks compared to the project activity. It does not face prohibitive technical barriers. It is observed that has the capacity to tolerate wider range of Organic Loading Rate (OLR) 13. Alternative 2 - Installation of anaerobic lagoons with sealed covers for wastewater treatment The installation of cover on anaerobic lagoons will carry potential technological difficulties. The PP runs the risk whether the cover has been implemented effectively and whether any potential biogas leakages are occurring. The biogas collecting cover system is subject to wear and tear due to: - Chemical corrosion (due to H 2 S presence in the biogas); - Mechanical fatigue (the cover expands and contracts continuously); - UV light aggression Alternative 4- Use of aerobic wastewater treatment using activated sludge Many problems can develop in activated sludge operation that adversely affects the effluent quality with origins in engineering, hydraulic and microbiological components of the process. The various microbiological problems that can occur in activated sludge operation include nonsettle able growth, pin floc problem, zoogloeal bulking and foaming, polysaccharide bulking and foaming 14. In addition, in order to operate under optimum condition, the dissolved oxygen (DO) level in Alternative 5 - Anaerobic digester without methane recovery The organic content of POME will be digested anaerobically by the microorganisms inside the digester. The process is a series of complex biological process such as hydrolysis, acidogenesis, acetogenesis, and methanogenesis, producing biogas by the end of the process 15. Each step involves a specific type of bacteria, of which growth and activity are affected by different variables (e.g. temperature, ph, retention time, etc). Particularly, the growth and activity of bacteria involved in methanogenesis process is affected by the organic loading rate and hydraulic retention time which varies Alternative 6 - Anaerobic digester with methane recovery but not registered as CDM project All the discussion of technological barriers under Alternative 5 (i.e. anaerobic digester without methane recovery) will be as well applicable here. Addition of methane recovery will increase the need of operation and maintenance procedures for the plant. There will be additional manpower required to operate and maintain the system as compared to the anaerobic lagoons. This team will need to be equipped with the necessary skills and expertise to ensure smooth operation. 12 Wu T.Y., Mohammad A.W. (2010) Pollution control technologies for the treatment of palm oil mill effluent (POME) through end of pipe process, Journal of Environmental Management, No 91, pg Poh P.E., Chong M.F. (2009) Development of anaerobic digestion methods for palm oil mill effluent (POME) treatment, Bioresource Technology 100, pg Activated Sludge Microbiology Problems and Their Control, page Information Sheet on Anaerobic Digestion, pg 4.

19 Barrier Alternative 1 - Installation of open anaerobic lagoons for wastewater treatment without methane recovery Alternative 2 - Installation of anaerobic lagoons with sealed covers for wastewater treatment - Other extreme weather conditions (e.g. high temperature, lightning, monsoon damage etc.); - Excessive pressure or stress (e.g. during peak production periods); and - Accidental damage and risk from fire / explosion. Alternative 4- Use of aerobic wastewater treatment using activated sludge the aerobic activated sludge system has to be maintained continuously. Therefore higher level of expertise will be called upon by the project owner to operate these systems in an efficient manner. Alternative 5 - Anaerobic digester without methane recovery daily subject to the chemical properties of POME and the volume discharged to the treatment system 16. Due to the complex association of different types of bacteria, digesters have a higher risk of breakdown and may be difficult to control 17. Often, problems are difficult to diagnose as there are several parameters involved. Readjusting the equilibrium of these parameters could take significant time. Thus, it requires a high level of expertise to operate the digester effectively and also constant monitoring will be required to ensure the balance of the system. Alternative 6 - Anaerobic digester with methane recovery but not registered as CDM project In addition, there will be also a need for precautionary measures for handling biogas (i.e. methane). The biogas is highly explosive and flammable, therefore, gas storage and piping system must be constructed in strict accordance to best engineering practice in order to avoid leakages. Hydrogen sulphide (H 2 S) gas which is present in the biogas imposes some risks as this H 2 S gas could accumulate in bottom tanks and is harmful in high concentration Yacob S. et al. (2006). Baseline study of methane emissions from anaerobic ponds of palm oil mill treatment, Science of the Total Environment, No. 366, pg Information Sheet on Anaerobic Digestion, pg Section Safety Anaerobic Digesters,

20 Barrier Other barrier: Lack of prevailing regulatory requirement Summary of barrier analysis Alternative 1 - Installation of open anaerobic lagoons for wastewater treatment without methane recovery Alternative 2 - Installation of anaerobic lagoons with sealed covers for wastewater treatment Alternative 4- Use of aerobic wastewater treatment using activated sludge Alternative 5 - Anaerobic digester without methane recovery Alternative 6 - Anaerobic digester with methane recovery but not registered as CDM project In Indonesia, the quality of the wastewater discharged from palm oil mill is regulated by the Decree of Ministry of Environment 51/1995. This regulates the maximum allowable concentration of COD and BOD in the discharged effluent. However, there is no regulation on how to treat the effluent. Therefore, it is most unlikely that the project owner will invest in technologies which entail higher investments and/or technical barriers. The following technologies have been predominantly used in the region (i.e. Indonesia) is Alternative 1, which is installation of anaerobic lagoons for wastewater treatment 19. This alternative is the most plausible baseline scenario as the investment and technological barriers faced are minimal. The capital cost and the operational cost incurred for implementing and operating covered lagoons is higher compared to open lagoons. Lack of incentive with high capital cost and high level of anticipated technological risks prohibit project owner to select this alternative. This scenario is not a plausible scenario for the PP. Lack of incentive with high capital cost and high level of anticipated technological risks prohibit project owner to select this alternative. This scenario is not a plausible scenario for the PP. This scenario is not a plausible scenario for the PP due to lack of incentive and high level of anticipated technological risks. In addition, the absence of policy encouraging methane recovery technology will prevent project owner from selecting this alternative. 19 The list of project activities (registered or under validation) in the region with the information of their baseline POME treatment technology is provided in Annex 3 of this PDD.

21 This step has shown that Alternative 1 needs the least investment and faces minimum technological barriers in comparison with the others. On the other hand, Alternatives 2, 4, 5 and 6 face prohibitive barriers due to higher capital and operational cost requirement as well as technological risks introduced. The outcome of this step is elimination of Alternatives 2, 4, 5 and 6. Only Alternative 1 remains. Step 4: Comparison of baseline emission of remaining alternatives The plausible baseline is, therefore, Installation of open anaerobic lagoons for wastewater treatment without methane recovery. B.5. Description of how the anthropogenic emissions of GHG by sources are reduced below those that would have occurred in the absence of the registered small-scale CDM project activity: Table 6: CDM consideration for Project Implementation Date Activities 9 February 2011 The Board of Directors decided to install anaerobic digester with biogas recovery after due consideration of CDM revenue potentials from the project activity. 10 February 2011 Signing of the main equipment/contractor contract to implement the project activity. 21 February 2011 Prior consideration submitted to the UNFCCC and the host country DNA. 5 May 2011 Conducting local stakeholders meeting. Demonstration of additionality The additionality of this project activity is demonstrated through the following barrier analyses. Investment barrier As demonstrated in Section B.4. of this PDD, the most plausible baseline scenario in the absence of this project activity would have been the implementation of a series of open anaerobic lagoons without methane recovery. Operation of open lagoons is the most economical as it requires minimum human intervention and energy consumption for their operations 20 and is the most prevalent method for treating wastewater in palm oil mills in Indonesia. On the other hand, in the project scenario, substantial capital investment will be incurred in the construction of new anaerobic digester (i.e. project activity) system with biogas recovery. Both the baseline scenario (i.e. open anaerobic lagoons without methane recovery) and project activity (i.e. anaerobic digester system with biogas recovery) do not generate any revenues to meet operational expenses. However, the baseline scenario is cheaper than the project activity. Hence, as compared to the 20 Wu T.Y., Mohammad A.W. (2010) Pollution control technologies for the treatment of palm oil mill effluent (POME) through end-of-pipe processes, Journal of Environment Management, Table 6, pg

22 baseline scenario, the project activity faces significantly large financial barrier as it involves higher capital and operational costs. Without CERs revenues, in the absence of the CDM project activity, there is no incentive for the PP to invest in such capital intensive project. The PP would have implemented the most financially viable technology, which is the series of open anaerobic lagoons without methane recovery. The registration of the project activity as a CDM project will provide the PP with additional revenue from sales of CERs which will alleviate the financial burden of the project and therefore, the PP will be more willing to invest in such project. Technological barrier It is expected that the PP will also face several technological barriers in the implementation and operation of the proposed reactor system. i. Performance risk Operation of anaerobic reactor requires high level of maintenance and its performance carries some risks. The performance of anaerobic digester is sensitive as it is a complex biological process involving different types of bacteria 21. The growth and activity of these bacteria are affected by different variables (e.g. temperature, ph-value, retention time, COD load of wastewater etc). Based on the study Baseline study of methane emissions from anaerobic ponds of palm oil mill treatment 22 it is shown that daily variation in chemical properties and discharged volume of POME will affect the methanogenesis process. Several control loops are required to keep the digester parameters within appropriate levels. All the parameters have to be balanced to provide best conditions for the bacteria. Improper operation of the digester or incorrect application of chemical substances would harm the microorganisms and lead to the collapse of the reactor system. Poor performance of the digester adversely affects the quantity and the methane content of the biogas which may eventually impact the quantity of emission reductions that may be generated from the project. In addition, there will be also a need for precautionary measures for handling biogas (i.e. methane) which is highly explosive and flammable. Gas storage and piping system must be constructed in accordance with standard engineering practice in order to avoid leakages. There is also a risk from hydrogen sulphide (H 2 S) gas which is present in the biogas. This H 2 S gas could accumulate in bottom tanks and is harmful in high concentration 23. In order to ensure smooth operation while preventing undue safety hazards, well trained and technically skilled manpower is required. In contrast, the risks associated in the open lagoons are considered very low due to simplicity and robustness of their operation principles. Operation and maintenance required is minimal given that the system is not automated. ii. Need for more manpower Unlike the anaerobic lagoons, the project system (i.e. anaerobic digester with methane recovery) requires higher level of maintenance in the operation of the reactor. There will be a need for more 21 Information Sheet on Anaerobic Digestion Yacob, S. et al. (2006). Baseline study of methane emissions from anaerobic ponds of palm oil mill treatment, Science of the Total Environment, No. 366, pg Section Safety Anaerobic Digesters, 22

23 technicians in the operation of proposed project activity (as compared to the most plausible baseline scenario (i.e. anaerobic lagoons). Furthermore, the staffs have to be trained to be qualified to ensure an appropriate handling of the anaerobic treatment system to manage the complicated biological, hydraulic processes and the precautionary measures for handling biogas. This team of staffs need to be able to provide timely assistance in the case of breakdown/unstable operations etc. Since the proposed reactor is not one of the most common wastewater treatment technologies in the region and the local operators are more used to the operation of conventional anaerobic open ponds system, the PP will face some barriers in the implementation of the project activity. Other barrier: Lack of prevailing regulatory requirement In Indonesia, the quality of POME discharged from palm oil mill is regulated by the Decree of Ministry of Environment 51/1995. It regulates the allowable concentration of pollutants both organic and nonorganic in the discharged wastewater from palm oil industry. Even though the quality of discharged wastewater from palm oil mill is regulated, there is no specific regulation on the technology to be used for wastewater treatment and for recovery of methane from the wastewater system. Therefore, it is most unlikely that the palm oil mill owners in the region will make large investments to implement technologies with methane recovery. Instead, using open lagoons with no methane recovery serves as an easier and lower cost option for them 24. However, such an alternative will result in higher GHG emissions into the environment. How CDM revenue alleviate the barriers to the project implementation The approval and registration of the project activity will alleviate the above three identified barriers and enable the project activity to be undertaken and contribute to emission reductions. CER revenues will provide the necessary financial incentive to the PP to implement such high-investment project activity and move away from the easier alternatives such as open lagoons system. The CDM revenue will provide a source of income for the project owner which will recover the capital cost for the project technology as well as the operation and maintenance cost. The expected additional CERs revenue will also mitigate the risk associated with the technological difficulties in the implementation of the project. Furthermore, the CERs revenue will help the PP in seeking and training the required manpower. B.6. Emission reductions: B.6.1. Explanation of methodological choices: Baseline emission As explained in Section B.4, the most plausible baseline scenario for the project is anaerobic lagoons without methane recovery. As per Paragraph 18 of AMS-III.H (Version 16), baseline emissions are calculated as follows: 24 Expanded Market Study for Indonesia Sustainable Energy Finance, Renewable Energy Opportunities in Palm Oil Mills in Kalimantan and Sumatra, IFC. ded+market+study+for+sustainable+energy+finance.pdf 23

24 BE y = {BE power,y + BE ww,treatment,y + BE s,treatment,y + BE ww,discharge,y + BE s,final,y } Table 7: Summary of Baseline Emissions No. Emissions Description Remarks 1 BE power,y Emissions on account of electricity or fossil fuel used 2 BE ww,treatment,y Methane emissions from baseline wastewater treatment systems Not applicable. Baseline emissions from electricity consumption will not be accounted for project because there is negligible electricity consumption in the baseline scenario. Applicable. Methane is the major component in the biogas produced during anaerobic wastewater treatment. 3 BE s,treatment,y Methane emissions from baseline sludge treatment system. Not applicable. There is no baseline sludge treatment systems affected by the project activity. 4 BE ww,discharge,y Methane emissions on account of inefficiencies in the baseline wastewater treatment systems and presence of biodegradable organic carbon in untreated wastewater discharged to sea / river / lake 5 BE s,final,y Methane emissions from the decay of the final sludge generated by baseline treatment system Not applicable. Treated wastewater is put to land application under aerobic conditions and there is no discharge to the river/lake/sea. Not applicable. Under the most plausible baseline scenario, sludge is used for land application under aerobic condition. Therefore, the baseline emission is simplified as follow: BE y = BE ww,treatment,y BE ww,treatment,y = (Q ww,i,y * COD untreated,i,y * η COD,BL,I * MCF ww,treatment,bl,i ) * B o,ww * UF BL * GWP CH4 Where: Q ww,i,y Volume of wastewater treated in baseline wastewater treatment system i in year y which is affected by the project activity (m 3 /year) COD untreated,i,y Chemical Oxygen Demand of the wastewater inflow to the baseline treatment system i in year y (tonnes/m 3 ) η COD,BL,i COD removal efficiency of the baseline treatment system i, determined as per the paragraphs 26, 27 or 28 of AMS-III.H version 16 MCF ww,treatment,bl,i Methane correction factor for the baseline wastewater treatment system i (MCF value is obtained from Table III.H.1 in AMS-III.H version 16) Methane producing capacity of the wastewater (kg CH 4 /kg COD) B o,ww 24